Genesis Mining: A Mathematical Approach

I’ve spent the last couple of weeks being obsessed with bitcoins and, more generally, cryptocurrencies. This specific post is about cloud cryptomining, or simply cloud mining, and more specifically, Genesis Mining.

If you want to obtain cryptocurrencies, such as bitcoin, you have two options: buy or mine it. Buying is usually mildly difficult and might end up costing you a lot (CoinBase charges a 4% fee, for instance) But mining bitcoins or ether also comes with its cons: electricity cost, heat, noise, etc. Another solution is to buy cloud mining, aka pay someone to mine cryptocurrencies for you. Of all the cloud mining out there, Genesis-Mining is by far the best (we’ll see why later). This article will provide a mathematical analysis of the products offered and whether or not it is profitable to buy.

Before I go on, I want to insist on one thing: this post contains Affiliate Marketing. I hate when people do that stuff, so I’m making it very clear at the top of this article. If you buy something on Genesis-Mining using my code, I will earn a little bit of extra hashing power.. And you will get 3% off your order as well. To make this an even better value, I will buy the same amount you bought using YOUR affiliate code so you get a little extra too. My affiliate cost (entered during checkout) is:

hjsazq

3% off your order!!!

Okay, now that’s dealt with, for those in a hurry, here’s a TLDR or a “short version” of this article:

  1. Genesis Mining Bitcoins contracts are an AMAZING VALUE (no unwarranted excitation here, we’ll see why later) and have the potential to be incredibly profitable. It will be very difficult for you to lose money if you buy bitcoin cloud mining contracts.
  2. In fact, Genesis Mining is by far the best way to obtain bitcoins over the long term. If you have any interest in cryptos, which you should, I’d recommend Genesis Mining over everything else.
  3. If you use my affiliate code (hjsazq) you will get 3% off your order AND I will buy the same amount you did using your affiliate code so you’ll gain 2.5%-5% extra hashing power. For free.
  4. Last time, Genesis-Mining sold out in less than 72 hours so HURRY UP!!!!

Yes, I really believe in this product. And now for the full article (and mathematical analysis), which is well worth the read if you are on the edge or hesitate buying:

Is Genesis Mining a scam?

No, it absolutely isn’t.  Genesis-Mining is as legit as can be and you’ll get what you ordered, period. If you buy 2 years of Ether mining  at 30MH/s, you will get 2 years of Ether mining at 30MH/s. No more, no less. In other words, Genesis Mining will fulfill its part of the contract. You WILL get your Ether/Bitcoin/Litecoin.

Why is Genesis-Mining potentially a bad deal?

Here’s the deal: Genesis Mining sells you a product X at price Y, but in no way or shape does it guarantee that you will make a profit on it. In fact, most of the times, you absolutely won’t. If you dig a bit, you can find a lot of people angry that the contracts they purchased weren’t as profitable as they thought or sometimes not profitable at all. Overall, there is a lot of misinformation on Genesis Mining and cloud mining in general, so I will clarify this once and for all.

Genesis Mining does NOT guarantee you will make any form of profit from their contract. Overall, it depends on too many factors. Say for instance Ether crashed tomorrow and went back to $10 per ether: everything you would have mined would be potentially worthless.

Looking at Ether more specifically, we can see these contracts are potentially very bad deals. Take the medium Ether cloud mining package for instance:

$869 less affiliate code is $840 or so. Please keep in mind this contract has no additional fees: what you pay is what you get. Right now, 30MH/s will grab you around $2.00 of Ether per day:

www.whattomine.com

This means that to get back the $840 you paid, you would need to wait $840/2=420 days. Your original contract lasts for 730 days. This means the last “310 days” would be where you would make your profit.

But that’s not all: Ether’s difficulty rises all the time, i.e. it’s harder and harder to mine all the time.

This means you will mine less and less ether as time goes on. You might get $2.00 or Ether today, but six months from now, you might only be getting $1.60. A year from now, you might be getting $1.20 or potentially even less. In fact, it may happen that your 30Mh/s is completely outclassed a year and a half from now.

So this means that out of the 730 days of your contract, it might not take 420 days to get your money back, but 520, 620 or potentially even 720. In other words, you have to put in a huge sum of money upfront with no guarantee that you’ll ever see your money back. At best, you will make a tiny profit of (730-420)*$2=$620 over the next two years and that’s if everything goes perfectly well. More than likely, based on future difficulty, you will be making $50-$100 in profits. Over two years, with massive risks.

Pointless.

All in all, if you want Ether, you are FAR better off buying it today. That way, you get all of it right now (instead of over 2 years) and you can fully gain if it goes up. You don’t have to gamble on the difficulty and how mining will go. In plain terms, I believe Genesis-Mining Ether cloud cryptomining contracts are just not worth the hassle.

Okay, so how is Genesis-Mining a good deal?

Obviously you aren’t going to buy Ether, Zcash, dash or Monero cloud mining. As we saw, those contracts are barely worth it – if you are lucky. Remember your contract ends in two years.

But Genesis Mining also sells bitcoin contracts which have no ending date and, as we’ll see, this is where the real magic comes from. This means that a contract you buy TODAY could still be earning you bitcoin five years from now.

Before we go on, please note that Bitcoin are, in my opinion, far safer investment that Ether. Ether itself is pretty safe and well-established, but the Bitcoin is on a whole other level. People might not have heard of cryptos, but they’ve heard of the bitcoin. In fact, most people don’t even know other cryptocurrencies exist, other than bitcoins. I would feel far more comfortable holding bitcoins that anything else and I would bet on bitcoins rising faster than any altcoin, at least if chosen at random. Yes, Ether is popular now, but there’s no way to really say that it will still be there in 5 years. Bitcoins, on the other hand, will.

Okay, Genesis Mining’s cloud mining will pay you in Bitcoins instead of Monero/Dash/Whatever. Already that’s a plus. Almost everyone would bet that, in five years, bitcoins will be higher than they are now.

But here’s where it gets good:

So for $3,975 less 3% affiliate code, that is, $3,856, you get an OPEN-ended contract. Open-ended simply mine that as long as the contract is profitable (more on that later), Genesis-Mining will mine for you. This can be 3 years, 5 years or 10 years. Keep in mind that aside from the $3,856, you will have NOTHING else to pay yourself (a maintenance fee is taken, more on that later). Yes, in ten years, your $3,856 could potentially STILL GIVE YOU BITCOINS.

Okay, so 25GH/s will net you:

… however Genesis-Mining DOES charge a maintenance fee on this contract of 0.00028 per GH/s. This “fee” is used to pay for electricity, cooling, maintenance and I do believe Genesis-Mining keeps a little part of the profits, which is fine by me (again, the fee is clearly presented, so I’m alright with it).

For 25 TH/s, this comes at $7 per day exactly. So you aren’t earning $37.92, you are earning $31. To gain your $3,856 back, it would take 125 days.

Sooooo…………. Just to compare:

  • Ether: it takes 420 days to get your cash back
  • Bitcoin: it takes 125 days to get your cash back

Obviously the bitcoin contract already far, far superior: almost 75% less time to get your cash back.

But here’s where it gets really magic:

BITCOIN CLOUD MINING CONTRACT LAST FOREVER!!!!

WOAH!

Okay, not “forever forever.” Genesis Mining states how the contract will end very clearly:

If the Contract Term is an “open-ended contract”, the Service Provider may terminate this Agreement with immediate effect if the Coins generated in the preceding 60 days do not suffice to pay the Maintenance Fee accumulated during such period.

So in clear terms, what this means is that your “open-ended contract” will end when 25TH/s will not generate $7 in bitcoins per day

This will happen if either of the two following scenarios happen:

  1. The bitcoin price collapses; right now, it would have to collapse from $8,200 to $2,200 AND stay there for 60 days. So far, the biggest crash we had recently was $7,500 to $5,500 and it lasted two days. Also, please note that many operations are far less efficient than Genesis-Mining, i.e. they wouldn’t be profitable mining with a bitcoin at $4,000, so they would most likely shut down operations. Even if the bitcoin DID crash 75% and stayed there for 60 days, the drop in difficulty would most likely make your contract continue.
  2. The difficulty explodes and bitcoins become much, much harder to mine. HOWEVER the bitcoin difficulty – so far – increases very linearly. This is because the current miners are pretty much at the limit of how efficiently we can mine (more on that later). I personally believe difficulty will AT MOST double ever 6 months; for instance, bitcoin difficulty has roughly doubled since last June. Still, even if difficulty increases, if the bitcoin prices rises as well (which it has), you will be fine.

In other words, it is very unlikely that your open-ended contracts will end in the near future. There would need to be some massive cataclysms in the near future or a total bitcoin collapse (in which case you’d lose money even if you had bought bitcoins instead). In fact, your contract is likely to continue until the next generation of miner arrives.

Until then, you will be mining bitcoins day after day.

When will Genesis Mining Open Ended contract end?

The gold standard of bitcoin mining is the Antminer S9. For roughly $2,000 USD ($1,400 on bitmain’s website, but hard as hell to buy), it can mine 14TH/s for a daily electricity cost of a few dollars. Private mining pools possibly have other kind of bitcoin miners, but it is very unlikely. The antminer is extremely hard to beat on a pure hashing basis and even harder to beat on a hashing/power ratio basis. To give you an idea how efficient it is, I have a recent processor and I can BARELY eke out 0.015TH/s. Yep, that big of a difference, the Antminer S9 is a beast.

The Antminer S9 is based on the 14nm processor architecture. The 14nm processor got “out” in commercial products in 2014 and the Antminer S9 was release in late 2016. That is, two years. But wait: the first generation of the Antminer was notoriously unreliable and prone to crashes. It took a good year for it to start to become stable and efficient.

The next generation of processors, the 10nm, got released this year. Please keep in mind it takes a while to have enough chips (and at a good enough price) to build a Antminer, which has 189 chips (!!!). If we use the same 2-year schedule, this would mean the Antminer S11 will get out in 2019. Add a year for testing and safety and we are looking for 2020 for the Antminer S11 to really become a thing. This means we have a good two years of extremely efficient mining with the S9.

But wait, that’s not all: even with the S9 in full swing (and almost every mining farm will use those, obviously), the S7, the previous generation, is still perfectly viable today. The S7 can pull off 4.7TH/s compared to the S9’s 14 TH/s for the same energy (told you the S9 was a beast). Today, the S7 is still profitable and many people still use it to mine.

This means that even in 2020 when people have the stable Antminer S11, the Antminer S9 will still mine profitably. In my opinion, it will be another two years before it is completely outclassed and not efficient enough to mine.

In total, I believe the open-ended contract with Genesis-Mining will end some time in 2022, and that will be when the Antminer S9 will be unable to mine efficiently enough to pay the maintenance fee. Your contract will end and that will be it.

So how much will we make?

It will take 125 days for you to repay your initial investment. Let’s be fair and say that difficulty will rise and that it will take 175 days instead. The remaining time – over 1,000 days – will be pure profit for you. Every bitcoin you receive from Genesis-Mining during that period will be your profit.

Now you can see why Bitcoin Cloud Mining contracts are interesting.

What about difficult increasing?

Much like Ether, the more people mining bitcoin there are, the less profitable it becomes. However, so far, bitcoin has been rising fast enough to compensate the rise in difficulty. I believe this trend will continue: the new hashing power will be compensated by a rise in bitcoin’s price. So instead of mining 1 bitcoin worth $8,000, you will mine 0.5 bitcoin worth $16,000.

It is better to buy bitcoin directly?

It’s a tough call. If you used your $3,856 to buy bitcoins today, you will obtain 0.4673 bitcoins and that would be it. With the open-ended contract, you would receive 0.00376 bitcoins per day that will go down slowly. Despite that, I fail to see one scenario where genesis-mining makes you less money than buying bitcoin directly.

Let’s go with a 10% monthly rise in hashing rate. This is something has never been seen before, but let’s pretend it happens. Since the contract starts in 4 months, you will be getting 0.0025 bitcoins then, then 0.00225 the month after, then 0.0002, etc.

If you do the sum of all those numbers – and keep in mind this is the absolute worst case I can think of, you’d be getting:

  1. 0.07625 BTC the first month
  2. 0.068625 BTC the second month
  3. 0.0617625 BTC the third month
  4. 0.05559 BTC the fourth month
  5. 0.05 BTC the fifth month
  6. 0.045 BTC the sixth month
  7. 0.0405 BTC the seventh month
  8. 0.03647 BTC the eighth month
  9. 0.03282 BTC the ninth month
  10. 0.0295 BTC the tenth month
  11. 0.02658 BTC the eleventh month
  12. 0.02392 BTC the twelfth month, for a grand total of 0.4784, more than if you bought bitcoins originally.

As you can see, even if everything is off, even if everything goes against you, after a year of mining, you get more bitcoins with Genesis-Mining than if you had bought BTC directly.

And by the way – your mining contract continues after that 12th month.

See where I’m going? 😉

WOW! But are there any downsides?

Yes, there are, unfortunately:

  1. The mining will only begin in March 2018, that is, four months from now. This means four months of waiting and, well, no mining. Four months of the difficulty increasing and four months of putting money in and waiting. I won’t lie, it sucks. I understand why Genesis Mining does it, they need the cash to buy Antminers, but it’s sooooooooo long 😉
  2. Genesis-Mining support is abysmal. I had some Ether missing from one of my contract and it took them 17 days to get back to me. But, I have to say they did and I got my Ether.
  3. Genesis Mining gets sold out very quickly, usually mere days after listing new bitcoin contracts and if you read my post, you probably know why.
  4. Sometimes, some payments don’t get through. You will see those payments missing on your dashboard. It happened to me once before and I had to write to Genesis Mining. Their customer service, which did improve a lot in recent weeks, is extremely slow in getting back to you. I will say that you should monitor your payment weekly, if not daily.

You should also note that this isn’t a “free ride.” There are some huge risks involved. For instance, I mentioned this before, but the bitcoin will crash. If it does, well, you might lose thousands of dollars.

There is really no guarantee the bitcoin will keep going up. I mean, I think it will, I’m sure it will, but it could certainly crash. Of course, this is a problem you would also face if you bought Bitcoins instead of buying crypto-mining.

Similarly, be aware of operational risks: Genesis-Mining could go bankrupt or stop existing. That being said, I want to say my best friend has been investing with them for 1.5 years and has never had any disappointment. He has over 250TH/s of mining with them and yes, he’s made a ton of money. He can vouch for them being legit and I don’t think Genesis will be going anywhere anytime soon.

Similarly, I won’t like, Genesis-Mining could go bankrupt. If it happens, you would be SOL. Now, these guys have been in business for a while and they seem to be doing fine, but you never know for sure. Just be aware the risk exists.

Oh, and if you want to see what it looks like inside a Genesis-Mining farm:

As for me, I currently have 30TH/s of bitcoin mining as well as a little ether/monero mining. I plan to add 200TH/s during this sale.

But in any case, before you invest with them, be aware of the risks. This is a high risk investment, but if you want to get into cryptos, let me tell you that this is the best thing I’ve found on the entire internet and I spent hours and hours trying to buy bitcoins and other cryptos.

Why doesn’t Genesis-Mining mine themselves instead of selling it?

For a couple of reasons. You know, this is something I spent a long time thinking about and I came to realize that they are doing this mostly because that’s what they want to do. Yes, they could keep all that processing power for themselves and mine bitcoins for themselves. However, that’s not what they chose to do, plain and simple. I will have to say that selling hashpower does help reduce their risk since they no longer need to hold a ton of bitcoin. All in all, I think a cloud mining company is what they wanted to do. Yes, they could perhaps make more if they kept all their power to mine themselves, but there would be added risk, and it would be a different kind of business altogether.

I like to think that there is more in life than money and that those people simply wanted to start a cloud mining company for the great public. Maybe they sit on 100,000+ bitcoins and are just doing this to promote the ecosystem and promote bitcoins. After all, the more people involved and mining, the better for bitcoins.

Lastly, it should be noted that by raising funds the way they do, they can have the money to buy more miners without touching the bitcoins they already have. Perhaps they keep 25% of their hashing power to themselves or something.

TLDR: It’s less risky, and they probably are making enough already with what they have. It might be a side venture or for fun. By getting paid in one shot like that, they reduce their operational risks.

Why shouldn’t I mine myself instead and save the maintenance fee?

Mining bitcoin is viable too, but please keep in mind that it is very, very, VERY difficult.

First, you will have to import a miner from China. Good luck, all I’m gonna say. Second, you will have to pay the electricity and deal with the heat. And deal with downtimes/network problems/maintenance. A fan breaks? Gotta order another one and guess the only country that sells them? Yeah.

Of course, you will have to deal with the noise too, which is almost unbearable. 85 Db, or a landmower. If you can do all this, then yes, mining yourself will MAYBE (it depends on how much you pay for the electricity) net you more. How much more? Well, if you pay $0.10/KWh, which is about $50 more than what Genesis Mining pays, a 25TH/s contract will net you an extra $3 per day. If that $3 is worth it to you, then by all means do it. Of course, you better hope your Antminer doesn’t die after six months or arrive damaged, and you better be able to guarantee 100% uptime too.

In total, how much will that open-ended contract earns me?

It’s hard to say for sure, but I like to split it into three scenarios. Scenario 1, the pessimistic one, has your contract ending after two years, with profitability quickly decreasing. Scenario 2, which I think is reasonable, has a moderate decay, with a 5% monthly decay in the profit/rate ratio and 4 years of mining. Optimistic scenario lasts five years and has a 2.5% profit decay, a. All of those are based on a 25TH/s order.

All scenarios are post-fees.

Pessimistic scenario

With this scenario, you start at $25 in March 2018, or $750 per month and go down 10% until below $100, at which point it turns to $0. Under this scenario, your mining contract lasts for 21 months and you earn $6,680 in total, for a profit of $2,824

Realistic Scenario

With this scenario, you also start at $25 in March 2018, or $750 per month, but only go down 5% per month, and your contract continues until below $50. Under this scenario, your mining contracts lasts for 41 months and you earn $13,168, for a profit of $9,312.

Optimistic Scenario

With this scenario, you start with $30 in March 2018, or $900 per month, but only go down 2.5% per month for the first two years, then 5% for the following two years, then 10% thereafter. The contract ends when you mine less than $50 per month. Under this scenario, your mining contract lasts for 58 months and you earn $23,756 for a net profit of $19,900

As you can see, there is a lot of variance in the earnings and I personally believe the actual scenario will be somewhere between the “Realistic” and “Optimistic” cases. I fully believe that $4,00 invested in Genesis-Mining today will net you $12,000-$15,000 in profits in total.

Wait, do I get to keep the bitcoins I mine??

Yes! For the purposes of this article, I compared everything in terms of dollars, but the bitcoins you mine through Genesis are yours and yours to keep. You get paid in bitcoins and you get to keep those bitcoins and do whatever you want with them. For your information, if you want to sell them, you can usually sell them at 5-10% premium to their market priice.

How do I get paid?

I will write an entire guide on this one day, but you get paid like you would for another other bitcoin payment. You send your wallet and they deposit what you mined there, usually on a daily basis, but sometimes they skip a day or two. You will get what you ordered however.

 

How does your affiliate code works?

Here’s how it works: when you order, when you are about to pay, enter the code

hjsazq

This is my referral code. You will get 3% off your order. Yep!

As for me, I will get a little percentage of what you bought as extra hashing. And to make this even better (for you), I will buy the same thing you buy using YOUR code, so if you buy 5TH/s using this code, I will buy 5TH/s as well using YOUR code. I’m going to buy 200TH/s, so why not?

Simply text me at +1 438 300 13(zero)1 with your affiliate code and amount bought. You will get an extra 2.5% TH/s of mining FREE! While this isn’t a ton, it’s certainly better than nothing.

To be fair, there are other codes you could use at checkouts (they would only net you a 3% rebate like mine), but after writing all this, well, I think I deserve it :-).  And you’ll get a little bit of free hashing power too, so why not?

Anyway, I hope you liked this little guide, I really believe in this cloud mining company and I think their open-ended bitcoin contracts are amazing value. At the very least, I hope you found it informative.

Liked it? Take a second to support fscomeau on Patreon!

, , , ,

2 Responses to Genesis Mining: A Mathematical Approach

  1. smart coin November 23, 2017 at 6:31 am #

    Very informative ;);) genius writing… My hat off to you, sir!

Trackbacks/Pingbacks

  1. How Profitable is Genesis-Mining? - F.S. Comeau - November 24, 2017

    […] no more complicated than that. The real magic of this contract, as I explained in my first post, is that this contract potentially lasts for a decade. For a comparison, their Ether mining contract ends after 2 years […]

Leave a Reply